Analysts don’t seem to agree on this Plug-in power supply (NASDAQ:PLUG) Share. According to data from FactSetSome analysts expect shares to be worth $18 apiece, while others think they are worth as little as $2. One of the biggest bears at the moment is CitigroupVikram Bagri is the analyst with a price target of $2.
Why is Bagri so down on Plug Power stock? He recently listed four reasons why he believes stocks are a “sell.”
4 reasons why Bagri is not a fan of Plug Power stock
In a recent research note, Bagri downgraded Plug Power’s stock to “Sell” from “Neutral” and lowered its price target from $3.25 to $2.00 per share. Although he gave four different reasons for the downgrade, most relate to the same issue: funding.
What exactly are Bagri’s reasons for the demotion? In the note, he highlighted “limited corporate liquidity, dilution from ongoing ATM issuance, elusive profitability and increasing competition.”
Limited corporate liquidity is the most obvious short-term hurdle. In 2023, the company issued a going concern statement warning that the company was at risk of running out of cash in the next few quarters. Continuation notices are often issued in advance of a possible insolvency. While the company solved the problem by raising new funds, those funds severely diluted shareholders – the second problem highlighted in Bagri’s research report. In January, Plug Power announced a $1 billion stock offering agreement that would allow its securities partner to sell large new blocks of shares essentially at any time.
Bagri believes that “this dilution will continue as the company needs more cash and profitability remains elusive.” And that brings up his third concern: elusive profitability. Although Plug Power has been in business for decades, the company has never been able to generate consistent profits. For example, in the last ten years, the company has not been able to generate positive profits in the last twelve months. In recent years, profitability has fallen even further as the company presses ahead with its expansion plans, which has resulted in a significant drain on cash flow from increased capital expenditure.
PLUG EPS Diluted (TTM) data from YCharts.
Bagri’s final concern concerns competition. In recent months, Plug Power has implemented price increases across all of its offerings, including equipment, service and fuel. Bagri questions whether these price increases are sustainable given the growth of competitors and the technological advantages of other incumbents. “An increase in prices in an oversupplied market for electrolyzers may either have a greater negative impact on sales than expected and/or the increases may not materialize given competition,” notes Bagri.
Are Plug Power shares really going to $2?
Currently, Bagri is the biggest bear of all analysts covering Plug Power stock. While his price target is $2 per share, Wall Street’s consensus price target is around $4 per share. Who should you trust? The correct answer would probably be to trust no one and avoid Plug Power stock altogether.
Legendary investor Charlie Munger famously had three categories into which he divided potential investments: yes, no, and too hard. Could Plug Power stock rise sharply in the coming decades? Sure, but there is also a reasonable path to complete bankruptcy. There are simply too many moving parts here for most investors. From funding to competition, it’s almost impossible to predict what will happen to this stock. Your best bet is probably to stick with a stock where you can actually gain an edge.
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Citigroup is an advertising partner of The Ascent, a Motley Fool company. Ryan Vanzo has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends FactSet Research Systems. The Motley Fool has a disclosure policy.
4 Reasons Plug Power is a ‘Sell’ According to This Analyst was originally published by The Motley Fool